Unhooking from US Companies: China

ibm china

E-commerce companies and banks in China are scrapping hardware and uninstalling software for mainframe servers made by American suppliers in favor of homegrown brands said to be safe, advanced and a lot less expensive.Domestic rivals of these companies such as Huawei Technology Co. and Inspur Co. are winning contracts from state company and bank IT departments at an accelerating rate.

Some companies, such as e-commerce giant Alibaba Group, have been building internal computer networks with open-source software and commonly available hardware.  The movement dates to 2008, when Alibaba’s computer-network department director Wang Jian proposed cutting back on foreign suppliers and replacing their wares with equipment and technology developed almost entirely in-house. What Wang wanted to get rid of most was the so-called IOE system, an acronym for an IT network based on the names of three suppliers: IBM, whose servers are packaged with the Unix operating system; Oracle, which supplies database-management systems; and EMC, the maker of data-storage hardware. Wang dubbed his campaign the “De-IOE Movement.”

Wang decided to revamp Alibaba’s network by replacing its Unix-based servers with less expensive, X86-based PC servers running on the open-source Linux operating system. In such a system, several PCs with X86 microprocessors inside can be linked in a chain to function as a server, replacing a mainframe server. The e-commerce company also built a database management-system of its own with an open-source structure, and started storing data on an internal cloud-storage system…

De-IOE Movement milestones were reached in May 2013 when Alibaba pulled the plug on its last IBM server, and two months later when Alibaba’s advertising department abandoned its Oracle database. The rest of the company’s databases are scheduled to switch to a homegrown system from Oracle’s by 2015.

IT departments at companies and banks across the country are now following Alibaba’s example — and hitting their longtime American suppliers in the pocketbook.  The switch to servers made at home has been a slow process for Chinese banks. Ultimately, the banks’ IT experts have been making these decisions, although they’re being encouraged by the government to choose Chinese suppliers, according to a source close to the China Banking Regulatory Commission.  [But]

“Getting rid of IOE means that all of the software must be moved and made compatible to domestic server systems, which seems to be a mission impossible,” said the consultant…And replacement costs can be astronomical. “The basic technology networks for an IOE system and a ‘De-IOE’ system are totally different,” said another source a state bank. “De-IOE will lead to transforming personnel and management. It’s hard to estimate how high the costs will be.”  Ultimately, said the IT consultant, Chinese banks will only manage to kill off IOE systems if products made by Chinese suppliers can provide comparable security and capacity levels, and if the new hardware and software are compatible.

China pulling the plug on IBM, Oracle, others, MarketWatch June 26, 2014

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